Menu

Tax season impact on car owners

It's only fair to share...Share on Facebook
Facebook
Tweet about this on Twitter
Twitter

It’s that time of the year where many in Mzansi start to prepare for the submission of their personal tax returns (IRP5), we note key points we have learned so far on what impact this has on car owners.

 

Although our Tax season analysis is solely directed to car owners, we would like to emphasize that Tax Season 2019 starts on 1 August 2019 for non-provisional Individuals. What is more enticing is the fact that individuals can now skip the queues and start filing via eFiling and MobiApp from 1 July 2019. Please also note that branch filing closes on 31 October 2019, eFiling closes on 4 December 2019 with Provisional taxpayers having until 31 January 2020 to file via eFiling.

 

Lets get back to car owners, by the term ‘car owners’ we are basically referring to people who either have company cars or get car allowances or use their own personal cars for occasional business/work. We will share our key learnings below:

     1. Car Allowance

Best put, this is the scheme where you get a monthly allowance (income source) for business use of a registered motor vehicle. Let me clarify this in an easier way, people who have been given a car allowance by their employers, get this financial benefit in advance. The car allowance forms part of your total employment package. At the time of completing and submitting your IRP5 documents, we have learned that you might have to consider the following key points:

  • Under the code 3701 on your IRP5 form submission, you then put the necessary information regards your travel in that financial year.
  • The financial year of tax submissions (tax period) goes from travel done between 1 March of a year to the following year in 28 February. For this years’ submission, you are looking at 1 March 2018 to 28 February 2019. All personal and business travels done during this period are used for your submission.
  • Log book. This is the single most important document needed for filing when you have a car allowance. This should not be confused with a logbook that proves ownership but this is more a book where you “log” your daily business trips or even personal trips when using a car purchased under a car allowance scheme. When completing your log book for the tax year, you will need to take note of the following:
    • Mileage: This is the distance in kilometres you travel in your vehicle in that particular period
    • Work/ business trips: You complete this section DAILY when doing business trips in your car. These are trips are directly related to your work. Traveling from home to your work address is not a business trip. When you travel from one destination to another for conduct official work, this is then regarded as a work/business trip.
    • Day to day: Each trip in each day will need to logged on your logbook independently and most importantly, you will need to put a business reason for EACH trip just in case SARS decides to conduct an audit on your IRP5 submission.
    • Opening and Closing in your Logbook: Your logbook will have an opening section and a closing section. The opening section is where you put the exact mileage at the start of your business trip (at point of departure). The closing section is where you put the exact mileage at the end of that particular business trip you have completed (point of arrival). Together with the reason of business trip, this allows SARS to confirm the mileage and reasons for you business trip on your tax submission.
    • Purchase agreement: You will need to also submit a purchase agreement document as part of your tax submission. This is used by SARS as proof that you actually own the vehicle you are making this submission using. It will have details of the vehicle i.e. (1) Registration number – e.g. 11BB22 GP (2) Price of purchase (3) Model year of first licensing registration – 2014 model (4) The make of the vehicle – VW Polo
  • Confusion vs Corruption: There is a thin line between someone who is honestly confused by all this and thus puts the wrong information on their submission (logbook etc.) and someone who is intentionally putting the wrong information with the intention of financially defrauding the tax collector. The best way to be on the side of right is to contact SARS and make enquiries on whether you properly understand and have completed you files in a way representative of your work travel.

      2. Reimburse or Travel allowance

Best put, this is when you use your own car for business travels. The purchase benefit of this car was not included as part of your annual salary package. This means you employer did not give you the benefit of a car allowance but you do use your vehicle for official business trips. At the time of completing and submitting your IRP5 documents, we have learned that you might have to consider the following key points:

  • Under the code 3702 on your IRP5 form submission, you then put the necessary information regards your travel in that financial year.
  • The financial year of tax submissions (tax period) goes from travel done between 1 March of a year to the following year in 28 February. For this years’ submission, you are looking at 1 March 2018 to 28 February 2019. All personal and business travels done during this period are used for your submission.
  • Log book. This is the single most important document needed for filing when you make your tax submission. You might not have as much information as a person who has a car allowance but you still need to fill this form to separate your personal trips to those that you claim are business trips. This document should not be confused with a logbook that proves ownership but this is more a book where you “log” your daily business trips or even personal trips when doing your submission. When completing your log book for the tax year, you will need to take note of the following:
    • Mileage: This is the distance in kilometres you travel in your vehicle in that particular period
    • Work/ business trips: You complete this section DAILY at each time you are doing a business trips in your personal car. These are trips are directly related to your work. Traveling from home to your work address is not a business trip. When you travel from one destination to another for conduct official work, this is then regarded as a work/business trip.
    • Day to day: Each trip in each day will need to logged on your logbook independently and most importantly, you will need to put a business reason for EACH trip just in case SARS decides to conduct an audit on your IRP5 submission.
    • Opening and Closing in your Logbook: Your logbook will have an opening section and a closing section. The opening section is where you put the exact mileage at the start of your business/work trip (at point of departure). The closing section is where you put the exact mileage at the end of that particular business trip you have completed (point of arrival). Together with the reason of business trip, this allows SARS to confirm the mileage and reasons for you business trip on your tax submission.
    • Claim forms: As this is a financial benefit (income source) you get after the completion of a trip, you would have submitted a claim form (usually called S&T) to HR or admin at your work place and would have been financially reimbursed for your travel. These claim forms should then be part of your tax submission as the prove to SARS that you actually did take these trips and were financially reimbursed by the employer.
    • Purchase agreement: You will need to also submit a purchase agreement document as part of your tax submission. This is used by SARS as proof that you actually do have a vehicle you are making this submission using. It will have details of the vehicle i.e. (1) Registration number – e.g. 11BB22 GP (2) Price of purchase (3) Model year of first licensing registration – 2014 model (4) The make of the vehicle – VW Polo
  • Confusion vs Corruption: There is a thin line between someone who is honestly confused by all this and thus puts the wrong information on their submission (logbook etc.) and someone who is intentionally putting the wrong information with the intention of financially defrauding the tax collector. The best way to be on the side of right is to contact SARS and make enquiries on whether you properly understand and have completed you files in a way representative of your work travel.

   3. Double submission

You do get instances where a person has a car allowance and has also made a financial claim to the employer for business/work trips. At the time of completing and submitting your IRP5 documents, we have learned that you might have to consider the following key points:

  • You will use both code 3701 and 3702 on your IRP5 form submission, you then put the necessary information regards your travel in that financial year. The information/ points stated above in each of the categories explained still needs your compliance in full.

Its important to contact your nearest SARS office should you feel your are inadequately capacitated to complete this section of your IRP5 tax submission.

0